Ironically, Buffet bought silver, made some money and sold too soon (by his own admission) and silver continued its ascent. More ironically still, Warren points out the risky nature of cash over significantly long time periods, but dismisses gold as a relic. (even though he bought silver).

Anywayyyyyyyy....the major point of this article is solid...precious metals can maintain purchasing power, and cash is not risk free.

Lower GLD Prices Will Cause Production Declines In The Immediate Future [View article]

I enjoyed the article, but...

RE: "My ultimate downside target is 90-100 for GLD because that is where producers would be squeezed so hard that mines would have to be shut down. Big/significant mines too, not just small/insignificant ones."

Except that the price of gold has nothing to do with the new supply coming online in any given period. Normal supply/demand calculations are irrelevant to GLD and gold because it is not like any other commodity---its stock to flow ratio is enormous, and the new supply minuscule compared to supply above ground.

Moreover, the paper market seems to have the upper hand for now. Physical doesn't seem to matter for now. (until the day it finally does).

Right now the "professional" gold (read paper) traders have been winning this game, and driving prices down--controlling the game. I wonder if they think that their cannot be a force majeure? or a default on the gold derivative market?

Reminds me of all the professional Wall Street bankers who were the experts on sub-prime tranches, who said, rightly, that sub-prime tranches had never failed, and that the risk was almost non-existent. Until Lehman, and the icebergs...

But of course plate tectonic forces have a way of holding, holding, holding, until an earth quake results. I wonder if one day we will wake up and prices will be set by physical ...(China?).

Dollars and gold are both safe haven currencies--one key difference is that the supply of gold grows 1.7% per year and the supply of dollars grows 10% plus.

Foreign holders of dollars are nervous because they know that the only way that the US can steer itself out of insolvency is financial repression resulting in negative interest rates, inflation as a policy, and fiat ex nihlo.

The global macro environment has changed radically where now we see central banks globally lowering rates, and competitively devaluing.

Historically, over the long term, these are precisely the times when it is rational to own gold.

Point by Point rebuttal: "As the U.S. Dollar continues to gain strength, gold prices continue to edge lower."

Gold does indeed have a negative correlation with the US$, except when it doesn't. Last year, both the US$ and gold were strong, and gold only lost minimally against the rising dollar, but finished higher against every other major world currency.

When supply and demand changes--gold and dollar can both gain together. Your view is US centric.

"Weak economic data from China has also made gold investors jittery."

Jittery Chinese investors in the long term fear not gold, but treasuries, and paper currencies. Consider gold a currency--whether the Chinese economy roars or staggers--the currency of gold is a safe haven.

It isn't driven by economic demand as much as fear demand. Jitterniess can in fact drive up demand, just as world economic jitters drive up US$ demand.

"Indian duties on gold imports will weigh down gold prices significantly, as India is the world's largest importer of gold."

Unless you have access to an news flash I'm not aware of, the Indian government has considered, and will (or already have) adopted a lower gold duty, the old duty was, I believe 8%, and the proposed one is 2%. This is already discounted by the market.